Following the upside surprise in the May CPI data released this week, markets are now pricing in a nearly two-in-five chance that the RBA will hand down a 25bp hike by year-end. But there are good reasons to think the RBA won't tighten policy any further. Indeed, price rises are moderating across a range of market services. And with the labour market cooling, homegrown inflation should ease in earnest over the coming quarters. That said, with the balance of risks tilted towards inflation remaining higher for longer, we've pushed back our forecast for the Bank's first rate cut from Q1 2025 to Q2 2025.
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